The Non-Jobs May 2012 Jobs Report — A Spark, Lots of Smoke, and Not Enough Heat to Even Toast a Marshmallow
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Have you ever been camping and tried starting a fire with damp kindling? You can get a spark, perhaps a bunch of smoke, but no real blaze regardless how hard you blow on it? This same statement can be made about recent job creation and numbers in the U.S. – a little spark, some smoke and not enough heat even to toast a marshmallow. With the new jobs report, there’s not adequate heat to even melt the chocolate in the S’Mores.
Not only did the May 2012 jobs report from the Bureau of Labor Statistics report a miniscule 69,000 net new additional jobs, it also restated downwards job gains for April 2012 from an original reported 115,000 to 66,000. (All employment numbers discussed are seasonally adjusted, so the time of the year is irrelevant). Since January 1, 2012, the U.S. has added 823,000 net new jobs (assuming they do not revise that number downwards again next month), That’s an increase of just less than 165,000 net new jobs per month. Most economists will agree that you need to add at least 120,000 to 140,000 net new jobs just to provide for the natural net increase of individuals in the job force.
So here’s where jobs were added and where they were lost in May 2012:
Transportation and Warehousing +36,000
Health Care +33,000
Wholesale Trade +16,000
All other segments were essentially unchanged.
Even though 69,000 jobs were added last month, the unemployment rate increased from 8.1 percent to 8.2 percent (seasonally-adjusted). So while we have rising job numbers we do indeed have an increased level of unemployment—perhaps adding validity to the argument that the country does need to create 120,000 to 140,000 net new jobs each month.
Now for the bad news. Since the peak of jobs recorded on January 1, 2008, the country, despite an $800 billion stimulus program (that in my opinion was successful in only stimulating $800 billion in new debt), still has 5.143 million fewer jobs. And the sizzling pace of 69,000 net new jobs per month (yes, that word sizzling was sarcastic), would require six years just to get back to the number of jobs last seen at the beginning of the year in 2008. And that would ignore the needed 120,000 to 140,000 jobs each month for new workers.
The real blaring number on the report was not the minimal number of jobs created, but rather the number of individuals that were added to the category Not in the Labor Force in May. A whopping 461,000 people were no longer considered as either in the labor force or unemployed this past month. That number represents 0.35 percent of all people employed as of May 31, 2012. To appreciate the true impact of what is really going on requires a simple table of data. The following table first presents the employment (and unemployment) data for May 31, 2011. The next segment shows the data on May 31, 2012. Note that in that 12 month period, 2.345 million people were transferred to the Not in the Labor Force segment. Now go to the outlined section which is Pro Forma and assumes that the number of individuals Not in the Labor Force had remained constant from May 31, 2011 to May 31, 2012. Had that been the case, then the unemployment rate would have increased from 9 percent in May 2011 to 9.8 percent a year later. Of course, that also assumes that no one retired in that same period. The true difference is somewhere in between I would imagine, but never-the-less, a greater unemployment rate would be reported today. I guess this is truly the New Math we were taught in school.
The bottom line is that the economy is not improving from a jobs perspective, and true unemployment is much more severe than being reported.
And this analysis shows why I call the unemployment rate a joke—as it is meaningless as a gauge of pain for those people out of work so long they no longer are even considered unemployed.
Yep—can’t even melt the chocolate in the S’Mores.